Could Allkem shares have another 17% up their sleeves?

A number of analysts are bullish on the outlook for this leading ASX 200 lithium share.

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Allkem Ltd (ASX: AKE) shares are joining the broader market sell-off today.

The S&P/ASX 200 Index (ASX: XJO) lithium stock closed yesterday trading for $15.32 a share. In early afternoon trade on Friday, shares are changing hands for $15.18 apiece, down 1%.

That's a better performance than most of the other ASX 200 lithium stocks today. And it's roughly in line with the 0.9% loss posted by the benchmark index at this same time

With today's slide coming atop of a 3% fall yesterday, could Allkem shares now offer a potential 17% upside?

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price

Image source: Getty Images

What's the outlook for this ASX 200 lithium share?

A growing number of analysts are becoming bullish on this ASX 200 lithium miner.

Among them, CLSA just raised its rating on the stock to 'accumulate'.

The asset manager has a $17.75 price target on Allkem shares. That's 17% above current levels.

Atop CLSA, Macquarie also has a positive outlook for the company, with a $17.40 price target forecast in June. And Bell Potter is even more bullish, coming out with a $19.20 price target for Allkem shares last month.

One of the potential tailwinds that could help drive the stock higher over the coming months is its proposed merger with Livent Corp (NYSE: LTHM).

In its quarterly activities report yesterday, the company said that during the period, "Allkem and Livent announced a definitive agreement to combine in an all-stock merger of equals to create a leading global integrated lithium chemicals producer."

On completion, Allkem shareholders will own approximately 56% and Livent shareholders will own approximately 44% of the merged lithium company. Allkem hopes to complete the merger by the end of 2023.

Allkem's balance sheet also looks strong. Allkem reported quarterly revenue of around US$334 million. The lithium company had net cash of US$648 million at 30 June. That's up US$71 million from 31 March.

How have Allkem shares been performing?

Allkem shares have delivered some outsized gains over the past 12 months, up 37%.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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